February 22, 2007

 

CBOT Corn Outlook on Thursday: Firmer following overnight strength

 

 

A firmer start is expected Thursday for corn futures at the Chicago Board of Trade following overnight strength, analysts said.

 

Most-active May is called to open 1 to 2 cents firmer.

 

In e-cbot trade, May rose 2 cents to US$4.41 a bushel and March corn gained 1 3/4 cents to US$4.28 a bushel.

 

The stronger close on Wednesday and the overnight strength will likely inspire follow-through buying, at least to start the session. If speculative buying returns to the market further gains are possible.

 

"We were firmer overnight, we keep making new record highs in open interest and fund money is pouring in," said Vic Lespinasse, floor broker for A.G. Edwards. "In all the grains we're overdone, and we're due for a correction, but I'm not going to predict when that is. In the meantime, go with the flow."

 

CBOT preliminary open interest overnight showed total open interest for corn rose 16,832 contracts to 1.54 million. Drops were recorded for March but sources said that can be attributed to rolling of positions ahead of first notice day Feb. 28. Most-active May and new-crop December contracts both saw open interest rise.

 

Fresh fundamental news for the market is lacking, but what has underpinned corn recently are concerns the snowy winter, especially in the eastern corn belt, combined with forecasts of a possible La Nina weather phenomenon will lead to an excessively wet spring and a drier-than-usual summer, as one private weather firm mentioned Wednesday.

 

A wet spring can delay planting and a dry summer can pinch yields. With tight ending stocks and strong demand from ethanol and livestock sectors, along with foreign demand, corn prices have rallied recently to add risk premium.

 

The U.S. Department of Agriculture said the weekly export sales data was delayed Thursday because the federal government was closed Monday for the Presidents Day holiday. Sales are due out Friday.

 

A technical analyst said May corn bulls have strong technical momentum and are looking for more in the near term after Wednesday's push to new contract highs and fresh 10-year highs.

 

The next major upside objective for the bulls is a close above solid chart resistance at US$4.50, the analyst said. The bears' next downside price objective is a close below solid chart support at US$4.20. First resistance for March corn is seen at Wednesday's contract high of US$4.41 1/4 and then at US$4.45. First support is seen at US$4.35 and then at US$4.30.

 

DTN Meteorlogix said the weather in Argentina benefits developing plants, noting periodic rains will mainly favor crops during the next week or more. In South Africa, dry and very hot weather will continue to severely stress reproductive-to-filling corn for at least another three to five days. It is likely that significant reductions in yield potential are occurring.

 

Looking ahead, the markets now are focused on the coming USDA Agriculture Outlook Forum, which is to take place March 1-2. At the time USDA will release its views for the coming year.